MissionU.com is approaching financing of post-secondary education in a model that is adding more responsibility to the institution, and they are not alone; Purdue University is offering this as well.

Under Mission U’s plan, there is no up front tuition. Once you reach a salary of $50k/year, they take payment in an amount that is 15% of your salary for 3 years. So, it incentivises the school to make sure you have a successful career after graduation, with you finding a job as quickly as possible earning the best salary and short-term progression as possible.

So, if anyone is familiar with this sort of model, how does it get taken advantage of via taxes? Are there any means for you to use tax credits, tuition write off, or would this be in the realm of a student load repayment, which would be rather limiting.

Let’s say you earn exactly $50k/year and receive no raises for 3 years. That is $22,500 in payments over three years. At best, you stretch it over 4 calendar years if you start at some time that isn’t the beginning of the calendar year. From a perfect scenario, you start repayment on July 1 of the first year and complete it on June 30 of the final year.

Year 1: $3750

Year 2: $7500

Year 3: $7500

Year 4: $3750

With a cap on student loan interest and assuming it all gets counted as interest, you are only able to write off a very limited amount ($2k/year).

Can the repayment be written off under normal tax write off methods, can you qualify for any tax credits (very unlikely), can you use 529 funds to pay for it?

Anyone familiar with this?